factors that are beyond your control. but i expect us to go a long way. we had a great run last year. we wound up with a third-string quarterback that did a very good job and very courageous effort on the part of our team. >> thank you for being here. >> thank you. >> great way to kick off the week. join us tomorrow. "squawk on the street" joins us tomorrow. good monday morning. welcome to "squawk on the street." i'm melissa lee with jim cramer. carl quintanilla is off. we're looking to open lower. picture in europe is similar, off of earlier highs and we have a mixed bag there. road map starts off with the rally. yes, the rally. the dow starting the week off with 4 1/2 year highs, both

indices clocking in six straight weeks of gains, the longest gain since january 2011. apple shares set to open at a record high fueled by buzz on the new iphone and mini ipad. lowe's, meantime, with a disappointing quarter. is it the victim of home depot's success? a multibillion dollar insurance deal, aetna buys coventry. we have the chairman of aetna on cnbc later in this hour. groupon fleeing the stock. fresh lows at the open. of course, we start off with the market slow and steady. dow and s&p posting six week

consecutive gains. one money manager quoted assaying it's the most disrespected rally he has ever seen and, jim, maybe part of that is because average volume so far, 40% lower than we've normally seen it. we've all seen the leadership of the sectors that typically don't lead rallies like staples, for instance. >> i think we've rotated, technicals having a better week than sysco. it's the funny thing about volume. if you sold stock right here, you'd still be paid. the bank doesn't question the volume. >> and if you buy stocks, it costs what it costs. >> right. and i think you're going to see big volume at the top, not here. people waiting for big volume, be what they are going to be waiting for is everybody to come off of the sidelines. my friend was talking on friday how mutual funds are very low until cash. the bonds have way too much money in them. so, yeah, it is true, this is a

disrespected rally. all of the great rallies that i've seen since 1981 when i started, disrespected. >> look at the fund flow data. people are pulling out of the equities. people are pulling out of stock and going into bonds which, you know, i don't understand given the technical term is squat unless it's a high-yield corporate with a c minus credit rating which will still only give you 6 or >> it's absurd what people want. in the meantime, we've seen -- i was looking at the charts over the weekend. 3m. look at the way that that stock has acted. home depot want to break you. ross stores upgraded today my merrill after an phenomenal run. they are big cap stocks that have done quite well. i think those that dist them don't understand the earnings growth. >> we are coming up on a period

of several key meetings by ecb policy makers at which something may be done. we're coming upon a period where it's believed that the federal reserve might do something here in the u.s. we are coming up on a period where prance the pcob in china will step in. there seems to be a willingness to stay along this rally because they are afraid that they are going to miss something on the upside here. >> but there are people who are also waiting for the fed. it's very similar to the '90s where you don't hang on to the federal reserve chairman. there's irrational excuberance. those who are waiting for china, look at that stock market, down g j gigantically.

i don't mind declaring that it's selfishness. >> whenever you open the show and say spiegel, i get nervous. >> really? >> there's a report on the -- listen, i'm just saying shall, we had a $66 billion plan. it's something. you talked about china easing. we have the stuff in europe. i wonder how much it is people putting their money here. we look at real estate, at stocks -- i have a buddy of mine. he trades shares and bonds. he's a dutch -- i'm not kidding you. he's probably watching right

now. >> we don't cover that as an asset class. >> many of his clients in eastern europe all want to be here. >> the other part to this is that you can be long here and with volatility so low, we're at five-year lows on the vix. you can have a position and insure against some losses. that's the other side of it. >> the other thing you hear, the vix is so low we have to go down. again, what you have to learn to do is throw away the playbook that got you to here. >> right. >> i know people will say, jim, you're not being vigorous. you're not understanding when the vix is low. this is a disaster. if you look at the vix in the o 90s -- >> not a factor. >> i'm a big believe in history but the history you referred to even five years ago was human-driven. the markets are now algorithm and computer driven.

do the playbooks even matter anymore? >> i think the playbook matters when you're trying to figure out if the caterpillar is having a good quarter or not. caterpillar numbers from dealers, they were terrific. i point this out because they were at the folcrum of when this started. that's a positive, not a negative. >> all right. speaking of individual stocks, let's talk apple. it's on track to open at new all-time highs, above 650 a share. the current intraday high, $648.19. the maker of ipad and iphone is up more than 60% this year. what a staggering run. >> yes. zf i liked your piece on that. i think you made good points about the run post. when everyone said it it was a bad quarter, it was a

disappointing quarter. people were disting the ipad. if you can live without, let me know. i mean, i'm on my iphone constantly. i think that's one of the reasons is -- the flipside, that's why facebook is doing poorly. when you ask anyone in the younger generation, what do they do on their facebook? not engaged on my cell phone. that's something that zuckerberg -- a usa today story calling for zuckerberg's head? it's not his fault that there's been radical acceptance to smartphones. >> it's not his fault that he didn't see it coming. >> let's fire him. who do we have? who is going to take his place? >> i'm waiting for palm to buy

hamstring. >> the sort of ipad iteration, smaller ipad, the tv is like another iphone thing. it's upside to the stock, not factored in in any way. they come out with a decent product which apple has had a lot of success in owning an indust industry. if they come out with something decent, that will be an upside to the stock. >> i agree. it's going to be anecdotal but i have been in a lot of cities in the last few weeks and it's almost as if your iphone is like a shirt, it's like pants and iphone. i mean, people don't want to leave home. it's just amazing. when you just do not see a lot of people without that iphone. people are taking pictures. i happened to be at a fabulous waste management dump this weekend. >> really? that's how you spend your weekends? that's why you took that extra day off on friday. >> it was just a fabulous dump. it was clean as could be. >> a fabulous dump? >> it was made for your iphone.

it was made for your iphone. >> pretty ugly. >> what do you do? i went to restaurant depot. must i say, for the record -- >> did you wash between the two trips? showered up? >> i did. i washed my hands before i went to the restaurant depot which is an amazing place, even cheaper than costco, if you can imagine. some place that comes after costco. you have to ware a coat because of the meat locker. and everyone had an iphone there, too, taking pictures of the lobsters. everyone had iphones everywhere i went, taking pictures of everything. >> did you find a lot of blackberries in the dump? >> ew, i never thought of that. >> recycle your cell phones. >> thank you. thank you. otherwise, you know, they get sent to foreign countries where they pick them apart. >> let's move on to talk about lowe's shares, taking a hit premarket. the home improvement retailer posting quarters of 657 cents a

share. sales fell short as did the retailer's forecast for the year. lowe's results are a contrast to those of rival home depot who posted better than expected profit and raised full year guidance. we were talking about home depot and made the connection that this has got to be hurting lowe's and here we have the proof of it. >> astonishing the difference -- the different paths between these two companies. i think that lowe's has lost its way. these numbers are devastatingly bad and home depot's numbers were terrific. it was not only gaining share but saying positive things about the consumer. lowe's has missed the mark here. i know they are very sensitive to anyone saying anything negative. i appreciate that. but they know it. they even said it in the release. they did bad numbers. >> the ceo said, we fully understand that we must improve

our level of execution, which was really just a very cleared mission thadmission that there something going wrong here. >> there could be a wall of shame here. >> really? >> yes. as much as i respect what he's done at various points in his career, this is just an unbelievable downturn. >> sunday, jimmy johnson leading, six laps to go, blew his engine. home depot is trading at four times -- 4.4 p.e. to lowe's. does it deserve a valuation premium? >> yes. yes. because it's taking it to the big die. it's taking it to lowe's. there was a time when we thought lowe's owned the women shopper. they were coming on strong. i looked at lowe's versus home depot in preparation for the quarter from the period

involving frank. lowe's tripled, home depot did nothing. he's a miracle man. it's working. when you go to home depot, i know you did not. i've been to three home depots in the last three weeks and they were all fabulous. >> he goes to the dutch and i -- >> why? >> the brand of faucet i was installing, the type, was not available at home depot. i did not know that. apparently it's exclusive to lowe's. i'm not trying to plug a faucet. >> did you see the $5,000 commode that they have? you're using the $5,000 kole's commode. >> can we get away from my commode for a second? >> yes, please. >> that is a true story. is it better housing market bad for these names? we always said it's a good thing.

if it's a bad housing market, people fix up their home. if we use that logic, is a better housing market bad for these places? >> frank says no. >> home depot says what matters is the percentage of dollars of the gdp going to your home. >> either way? >> yes. >> either renovating or buying? >> yes. it's a win-win thing. home depot says the percentage of revenue going to homes from the gdp has finally increased after multiple years of -- it increased at lowe's. >> in this particular market, when we talk about a better housing market, we're talking about foreclosures being bought and an average of $7,000 that goes into each foreclosed home. that's a lot of muoney. >> or one really nice toilet. >> look, it's really important to recognize that one company is much better than another at

various times. >> right. >> people don't think that a ceo can matter. those are people that don't understand retail. whether he comes in and changes a directions of a company, whether it's frank who resurrects home depot, it can happen. let's move on. it's the latest multibillion dollar deal in the health care industry. aetna agreeing to buy coventry. the stock is worth $42.08. aetna says the transaction will increase the company's medicaid footprint. we'll be speaking with the ceo in a little bit. this could change the health care system. i think it's a third deal that gets commercial insurers deep near government finance insurance. >> 30% governing this, 12.6 times 2013 earnings. that's a discount to other medicare deals.

so far it looks good to me. >> you said something in the tease that i would like you to expound on, sir. >> let's talk about the draft in the first round of -- >> you said you thought this as was a referendum that obama will win. >> paul ryan would tell you this is a stupid deal, if you listen to me, you don't want to do this deal because we're going to roll back everything. >> because you're betting on obama care with this deal? >> yes. a 49-state sweep for obama. >> everybody is making the same bet. they are not going out here on a limb. this is really the trend and they are saying, we've got to get in front of it. we've got to buy the assets because the other assets are also in play. >> one of the smartest people in the industry had to do this for wellpoint. i like the fact that aetna recognizes the future. a lot of people thought that maybe they didn't get it. they didn't get that obama care is the law of the lamb when justice roberts, who privately is telling people, listen, dint want to deny 50 million people health care. he didn't want to be the chief

justice that took that law back. >> a couple other names to watch are sentine. they could possibly be out there. they are certainly talked about with targets with commercial insurers getting deeper into insurance. those are number names to watch. >> i hate to recommend when they don't have the fundamentals. >> there were huge drops, texas problem, i think, down 30% in one day. >> dogs won't eat that one. you can put any label on it. dogs won't eat it. coming up, aetna chairman mark bertolini in his multibillion dollar deal to buy coventr coventry. more "squawk on the street" straight ahead. control. [ engine revs ] during the golden opportunity sales event,

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. well, groupon is the morton salt. according to "the wall street journal," including netscape, are exiting the deal. groupon fell to lows. they are down 75% so far this year.

stock trading at 28 times earnings as well. >> i got a deal about a portuguese restaurant. you tell me if this makes you want to go to the portuguese restaurant. it's a better place for a date than a hole in the ground full of barking french dogs. >> wow. >> was that real copy from -- >> that was -- >> paid somebody to do that? >> that was groupon. i thought, i've got to go to that portuguese restaurant. not. this is the kind of copy that they are sending and you blame marc for wanting to sell? a ground full of french dogs barking? >> be a little granular. >> marc andreesen, by the way, he sold but made $14 million.

>> $14 million for andreesen? >> cash down to tune of 600 million, whatever it was, it was a big number. you had andrew mason -- >> sweet guy. sweet man. >> many people would probably say that marc andreesen is one of the smartest guys in tech and he's selling. >> cramer is being sarcastic. your sarcasm. i just want to make sure people know. all right. coming up next, there's a stock cramer's about to highlight in a position to get off to a fast start or not? find out in his mad dash. keep it here. the better you t. so we have ongoing webinars and interactive learning, plus, in-branch seminars at over 500 locations,

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all right. time now for cramer's mad dash. wells fargo in your focus in. >> yes. i think this is a sound little call. why? because have you ever heard anyone actually raise numbers for the banks? jpmorgan is saying that the amount of money that they are making on mortgages, brian, is extraordinary. we don't think that. mort ga mortgage rates are so low. these banks are going to report better than expected numbers. i tell you, i rest my case, the financials are ready to move. >> here's what i worry about.

45% gain over the past year. do people already think that the net interest rate is going to raise? >> what have they done over the course of the last five years? they have been stone cold. i think that you have to recognize that the banks have been an anchor. this stock is unchanged in a long time. >> i can see a situation where congress says to the banks, you're making too much money on mortgages. you're borrowing on the cheap. rates are not low enough. >> they can turn on these guys, too. i will point out that they are so busy running for election, and remember elizabeth warren? race for her life. >> battle up there. >> in the meantime, bingo.

>> not zynga, bingo. >> it's too early to buy zynga. >> the opening bell is next. ♪

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there we go. opening bell for this monday morning at the big board, sandstorm gold celebrating today. operation backpack providing new school supplies to new york city's homeless and domestic violence shelters. great cause there. taking a look at the stocks we're watching, facebook shares, they are looking negative and it it looks like we could be threatening a new low on shares of facebook. that new low was on friday. an upgrade from capstone from a buy to a hold. valuation 16 times estimated 13 earnings provides upside to this name. >> jim stewart with a terrific carl with more buzz for facebook, trying to do something more interesting. i don't see it. i still question the valuation

and valued like google, it would be dramatically lower. that's the $6,000 commode i'm talking about trying to get you to -- it's for people who think that their doesn't stink. >> i'm sorry to interrupt your talk. facebook broke 19. 18.93 is the new low here. >> never ends. >> on the flipside, apple shares right out of the gate. >> don't know the analyst, forgive me, initiated a buy with a 36 target. microsoft was at 36 bucks for a cup of coffee back in late 2007. >> microsoft? >> microsoft. >> i don't know how to do this show. i just say stuff. >> look, this is one of those markets where we could focus on facebook or the dramatic multiple expansion and earnings going on with stocks like united

technology. the freeport run last week. i mean, these are remarkable runs in the face of freight going down and rates going down. world trade doesn't seem so great but the companies -- the international companies in america are doing well and you talked last week about rotation, the verizons of the world are stillborn here for a few week. i see money going into tech post sysco. these are the things that matter. i'm surprised citicorp is down. >> i thought of btx this weekend. there was a "new york times" article about the growing need for air conditioning because the only demographic boosts are in sort of the equator nations. >> and it's hot. >> and it's hot. they are not going to gain productivity. you can argue that air conditionering was the greatest enhancer in the world because we're able to work inside more. i thought utx and other makers

because it was unbelievable how much growth they are projecting. >> best buy coming down. there's a situation where i think that they appoint a new ceo. the previous ceo is trying to make that move of david faber there. i would say, good call. it doesn't look like there's a firm footing on schultz's move. >> lowe's is down more than 4% this hour. groupon, by the way, $4.50 is that low. it's down 4% on shares, again, that a report was not just andreesen selling but a number of early investors saying, you know what -- >> i think copy needs to improve. >> you don't want to go to that portuguese restaurant between 1:00 and 1:30 on saturday afternoon? >> no. it's a better place to go than the black hole of calcuta, kind

of an analogy. >> aetna shares, by the way, let's take a look at that ahead of our conversation with mark bertolini. a lot of the shares have been strategically done in this marketplace sending the enquirer higher. >> it's been helping their stock because people like to see growth. this is a remarkable thing because if you remember wellpoint got clobbered when they did the deal. they got clobbered. >> maybe that would -- what was the timinging of tha of that? was that before the roberts' thing? i like your point. this is a bet on obama care. >> yes. >> this is the law of the land to your point. they will stick around. aetna will get 1 1/2 medicare

part d customers on their roles. >> yes. >> we expect an expansion of medicare and medicaid and we want to take advantage of it. >> bigger presence on this story, this is -- geez, these two companies are synergies. there's a lot of good here. i wish i had seen this coming. coventry had been a serial disappointor. these are companies that had not delivered but suddenly in a larger house people like them. >> it's something to watch as we go forward. let's check in with bob pisani who has more on what is moving this morning. >> good morning. here's coventry. up 18%, $41 in change. it was $34 a short while ago. i'm not sure as i'd go as far as saying that they are endorsing president obama. this will increase their

medicare advantage which would be a direct beneficiary of obama care. clearly some quarter million people here would get a foot cold in medicare part d platform and a foothold in medicaid in general. medicare part did. certainly seems like they are betting at this point that the medical exchanges are certainly coming and the affordable health care act is here to stay. you see that stock up 18%. i want to talk about the rally going on. i said two weeks ago this was the most hated rally. it seems like everyone thinks it's the most hated rally. the journal had an article about this. we're near four-year highs in the stock market. the other is, look at china. china is near four-year lows in their market and yet we're near four-year highs. something's got to be wrong here. i'm not sure what is wrong with this story. the chinese market is very close to foreign investors and that may be distorting their market. i would certainly agree, our

market might be slightly distorted by mr. bernanke, by the bernanke put. i would agree there is some kind of premium here on the u.s. market but this idea that the only reason that we're near four-year highs is because there's the prospect of qe 3 is ludicrous. whatever that premium is, that multiple above where we normally would be, it's not the reason that we're holding up better. the reason is, because earnings are not collapsing. yes, they are not accelerating like they were in the past three years. we're expecting 6%. these are new numbers now, after disappointing second quarter, we're expecting earnings to grow 6% this year. u.s. corporate earnings are just shy of all-time highs. we will probably hit all-time highs this year. they are not coming down that much. so the bottom line is what matters is all the u.s. earnings that are coming in here and the fact that we are still the best, safest haven in the world. finally, i want to mention a polowe's. this is the second time that

they have missed this year. so everybody now agrees that they are clearly losing market share to home depot on a second miss you certainly don't get a chance like that to say they are not losing market share. guys, back to you. >> thank you so much, bob. let's switch to rick santelli. how are you doing? >> hi, i'm not going to pick one because there are dozens of newspapers, dozens of blogs going back and forth on europe, on how much germany is going to be the co-signer for everything in europe. you could disagree on what these promises may bring but one thing you can't disagree on, it's probably going to be years and another article said five years before europe rights itself. that seems to make some sense. look at interest rates as these stories came and went. whether you look at our five-year and ten-year on 24-hour charts, their yields were higher. same thing to be said for a ten-year boom.

we talked about how the spanish stock market, if you look at its chart, it's absolutely amazing how it tracks you with the equity markets. if you think about it, this might give us an indication, an indication but not guarantee the future in terms of interest rates and stocks today, just like the purchase of coventry. a bet is a bet. ecb, a bet's a bet. does that mean that's the way the future's going to turn out? probably not. back to you. >> thank you, rick. let's go to jackie at the nymex. hey, jackie. >> rising earlier this morning was the wti and pairing off a bit. we saw confidence because of the data and confidence in the u.s. economy. seeing profit ticking under the 200-day moving average. set to expire tomorrow, brent prices rising a little bit, trying to take the risk globally

off the table. switching gears for be a second over to gold, continuing to trade above 1600. but lower this morning. strength in the dollar not helping the precious metal out. the september fomc meeting, traders not expecting much from bernanke at that point. expect to stay pretty much trade bound in terms of the gold trade. 1580 to 1460, that's where we are. >> thank you, jackie. aetna jumps on the merger bandwagon. we'll be speaking with mark bertolini about his deal to buy coventry health. in communities across the country. whether it's supporting a delaware nonprofit

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apple shares are soaring and are at an all-time high. it's now up $80 a share.

>> it's worth it to take management seriously when they say don't worry about the shorter term. >> right. >> people don't seem to want to take tim cook seriously. he's been there forever. he's really fabulous. well, now let's move on to the big deal in the health care sect tree. aetna buying coventry. here for an exclusive is mark bertolini. it's a pleasure to speak with you today. >> how are you, melissa? >> good, thanks. i want to ask you about some of the financial assumptions. 90 cents in 2015. do those forecasts change if president obama does not get re-elected and republicans win the white house? >> no, they don't. i think this combination is far beyond what happens in the election. it really gets at the issue that

is driving our nation's debt, which are our entitlement programs. medicare and medicaid drive a huge portion. programs around the world are busting governments. this is a way to get at the cost structure. we believe these programs improve care, reduce costs, and provide a more effective outcome. >> mr. bertolini, one of the things that i was looking at could have ven treent versus you, you've been very resourceful getting, 3, 4% off of the float. just from investing coventry's money better. >> that has a huge impact on the deal and we need to look at what we need to be investing in to go into a health care reform and we'll use the capital more effectively. >> how were you able to get this

so cheaply? you did well here? >> it's a more diversified player so it doesn't have the kind of p.e. associated with it that you would see on a pure medicare and medicaid player. it's a company that is looking towards the future and was looking at a combination as a way to get through and into health care reform as well as succession. it all really worked between their chairman and i to come together with this deal. >> mr. bertolini, it's brian sullivan. how do you control costs in an area, medicare, medicaid, where costs have been uncontrollable for the better part of 40 years? >> i think the bottom line is getting people into a managed situation. and we've had very good results by reducing readmissions and improving their overall costs in medicare advantage by putting case managers on each case, taking out the medicare fee for service and driving down costs, like congestive heart failure,

by as much as 49%. >> mr. bertolin ichi, you said one of your earnings calls that you were not interested in bulking up on medicaid. and in the statement today the company says that's substantially increasing edna's medicaid footprint. can you explain to the investor looking in, it may seem like an about-face. can you explain how those statements match up? >> sure. melissa, what i said was we were not interested in buying a single threaded at the current multiples and margins that they were showing. we thought the street way overvalued that. we were not going to pay a premium on top of that. that kind of valuation was not placed on the medicaid business. i was not talking about the medicaid business in particular. i was talking about those specific medicaid managed care players. >> pharmacy benefit management,

$15 billion together pharmacy spend. what does it do for cvs, mhs, and in terms of being able to go in there with buying power and save money? >> well, first of all, jim, we have contracts that run to termination that don't have any outs on them. so we're looking at least until 2015 before we can take advantage of that $15 billion spend. so as a result, in our deal model, we don't have any synergies associated with a pbm but would see relatively good s synergies. >> here's where our diversification comes into play, jim. we think that where exchanges come up and when they come up, what we will see is individual small group and medicaid rotation of members moving in and around the market. and unless you're in those free product sets, you're going to have a hard time keeping brand awareness and consumers. because they will move in and out of jobs and in and out of

medicaid. we thi they have a low-cost platform, an efficient product and we can move that row and tags and keep the brand awareness among our members. >> mark, we are in our election year and your industry has become a politicized industry. from the industry perspective, is it better -- and i use this not from a political standpoint but is it better to have mr. obama re-elected because you know what the laws look like as opposed to republicans come in, possibly revoking. >> reporter: repealing some parts of the law and making it uncertain for your industry? >> i'll go back to a point i made earlier, melissa. as i travel around the world and aetna is in multiple countries around the world, every government paying for health care through single payer systems is having trouble with it is budgets. so it's not about who pays. it's really about the underlying costs of the system and whoever figures that out is going to be

a huge advantage to whoever is paying, whether they are a private payer or a government payer. that's where we're focused. so i think this election, while important for all of us in a number of different ways, has less to do about our strategy than what we do to fix the nation's debt, get at our deficits by fixing medicare and medicaid, and ultimately getting people higher care. >> the aetna buyback has been one of the most consistent buybacks. 2013 post closing, going to go back in? >> of course we are. we are always looking at deploying our capital in three ways. to pay our dividend which we'll update on an ongoing business, secondly, internal growth, third, we look at acquisitions and fourth, we buy back shares what with we have left. very eye fish efficient on our .

>> mark bertolini, chairman and ceo and president of aetna. >> good story. he explained a lot of things and it's not so bad for him. it could be a win-win. i know people hate to hear that. we should be more critical about it. the stock is going up for a reason. it's a good deal. much more "squawk on the street" straight ahead. >> announcer: what can you do in 60 seconds? what can you do legally in 60 seco seconds? how about critique six stocks. can you make it? we'll find out when "squawk on the street" returns. tdd#: 1-800-345-2550 you should've seen me today.

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all right. before we get to 6 in 60, let's check in on what is coming up in the next hour. >> facebook is trading at half its ipo price. we've got a guy on the program, mark hulbert who says you can

knock another $5 off of that. we'll talk about lowe's. and exxonmobil, one of america's favorite stocks, why potentially you could should hold that. >> time now for 6 in 60. >> ross stores. >> merrill upgrade and upgraded. >> jam, smucker's. >> the food stocks have kind of cooled except for this one in campbell's. i'll go with it. >> price target raise of deutsch bank? >> yeah. >> harddrives, seagate technologies. >> this has been remarkable ever since they disappointed. >> williams-somona. >> what a gutsy call to go ahead of the quarter and say that they are going to make the quarter. i think that's too high risk. >> what else can you say about dell?

>> it doesn't have it. i don't want to buy it. >> and wells fargo, weak earnings, i guess? >> yes, exactly right. >> have there been any other kind of earnings for dell recently? >> you have three seconds. >> priceline.com. >> people were saying there is hope to european sales. i'm not going there. >> we didn't get to zagg. >> i had the ceo on saying sell, sell, sell, he said don't worry about it. it's looking pretty good right now. >> ceo stepped down unexpectedly. >> it was one of the stocks that i used to get yield. i invited jeff gardener on to say, listen, this is a defend your life call. century link has been good, obviously verizon and at&t has been good. >> he'll tell a national audience. >> you can talk about zagg, right? >> we are. coming up, the apple

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let's get to the road map for the next hour of "squawk on the street." it's the tale of two techs. apple hitting another all-time high while facebook has broke the low, the $19 level. we'll sort through that and talk about facebook's big dive. that's next. >> and lowe's fundamentals and dividend yield, 2.4%. should you be adding lowe's to your portfolio. >> plus, bmw is jumping into the car selling business but zip cars down year to date. is preemier car sharing in for a ride? shares of facebook breaking through the $19 level just moments ago. 18.97.

it was lower than that. 18.75 was the new low. back in may you wrote that facebook should trade at $18.90 a share. >> thank you. >> we've had a quarter so i'm wondering if you've updated that and if facebook should be trading at lower than $13.80 or higher. >> the earnings forecast does not provide any information that would suggest that my original analysis was wrong. i should say, that analysis was somewhat not science. one might put 257 cents above or below it. we're getting relatively close to that $13.80 if you add in 25%. the real story behind that target was simply that facebook's going to have to grow at an incredible pace in order

to justify its valuation and if anything it looks like the growth curve for facebook's revenue is decelerating, as we all know. so, if anything, my $13.80 projection might even be too optimistic. i basically, bottom line, don't see any reason to change that $13.80 target. >> mark, it's simon. i was surprised to see on the money section of usa today that they are questioning whether mark zuckerberg should go. they say on the west coast it's a popular to talk about the potential ousting of mark zuckerberg. projections.ing on revenue facebook is trading at a price similar to google. that's an optimistic assumption. you give google price to sales ratio and look at what the average ipo grows for the first

five years of life. voila and you come up with what should facebook should be trading. >> does zuckerberg not matter to you? >> well, of course it matters. the point is that my basis of my calculation is the numbers. and so i have no comment on the personality. >> in terms of the numbers, mark, has anything developed since your column back in may that is surprising to you in any way in terms of how quickly, for instance, the stock price has fallen on the back of the lockup expiration? >> well, one can play this kind of back of the envelope game like it's a parlor game of bad zuckerberg, you can do that with any stock that comes out and try to predict where it should be trading and then try to backdate where it should be trading now

in order to produce that number five years from now. does it always this quickly realize that? of course not? this is the thing that always one has to worry about when something like my projection in may comes so close to being true until three months, is that you start believing that all predictions are going to be this accurate. this is not a science. nevertheless, if you see a company coming public, you were to try something like the analysis that i did, you would probably come out far ahead than if you simply jump on board with the latest fad on wall street. >> mark, good to speak with you. >> my pleasure. >> mark hulbert. >> let's send it over to courtney reagan back at hq. >> hi, brian. let's take a look at shares of casino stock. some of these names performing very well. taylor revenue jumped sharply and august could actually log record ref new numbers for some of these casinos over in maca

some folks that put off travel are there now and gambling. wynn and las vegas sands and mgm are all up today. >> lowe's reporting second quarter earnings down 10% while same-store sales weakened. we'll sort through the numbers and tell you how to play the space. don't forget, lowe's is a dividend play. born with.omething you' and inspires the things you choose to do. you do what you do... because it matters. at hp we don't just believe in the power of technology. we believe in the power of people when technology works for you. to dream. to create. to work. if you're going to do something. make it matter. wanted to provide better employee benefits

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lowe's is down 4.5% after second quarter earnings estimates early this morning. joining us now is allen at barclays capital. good morning to you, alan. i've got here that you've slashed your price target. did do you that today in response to what you heard? >> i missed the beginning of your question, simon. >> you're slashing your price target. is that in response to what you heard this morning or had you done it in anticipation of results? >> we did it this morning but also earlier this year as well. >> so where are you now? >> 25. >> okay. and why is that? >> basically, we've taken our earnings numbers down pretty substantially for this year and next. for this year, we lowered our

estimates by 20 cents and for next year, a full 30 cents. the bottom line is that we think it's apparently very clear that home depot continues to take share from lowe's and really at an accelerating rate. our outlook for lowe's is less positive today than where we were. >> even though obviously the share prices have moved to such an extent that home depot has risen substantially, 27% compared to lowe's which is up 44, 45? >> that's correct. >> you still think there are gains to be had. would you give any sympathy to the ceo of lowe's who says it is an organization under significant change, they are transforming the business and basically people should give them a break for that? >> well, it certainly is an organization under a lot of change but the changes are taking longer to implement and, in fact, the ceo told us on the conference call right now they

are pushing out their expectations for benefits from those changes to the midpoint of 2013. so we think that rather than adopt an attitude where the changes will be happening sooner, it's going to be occurring later. >> alan, stay with us. i want to bring in the senior research analyst of piper jaffray. >> okay. >> for more on where we are with lowe's. peter what is your take on what is going on this morning? >> i would agree with some of the things that alan said. lowe's is pushing back some of the benefits that it expects to receive from its turnaround. that's a pretty slippery slope. i would not expect if we get into next year you can certainly see further pushback from these initiatives. the fundamentals are clearly different than home depot. last week home depot put up a great quarter. they misjudged promotions and that impacted their gross margin of the quarter. >> peter, you point out that real private residential income

growth accelerated in the second quarter and that's an uptick and perhaps there is remodel cycle and improvement sickle under way. can lowe's still turn itself around in order to capture that upswing? >> yeah. we do remain bullish on the housing cycle from the residential private fixed investment static thaw mentioned and our own survey work suggests that we're seeing good remodeling. that would provide support to lowe's. we have to remember they are in a fairly significant turn around here, a bit of a state of flux and it's hard to get confidence in investing in shares here when the fundamentals just aren't picking up as we would have expected. >> is it a two-horse race? is it only lowe's and home depot's? it's it really just one or the other in. >> well, from a public company standpoint, that's how investors look at it. certainly there are other small cap ways. lick kwi date fors are one that

we like. when you're looking at home depot and in large cap, we think the stronger one is home depot. >> okay. so we can't -- my point was, can we assume that if one is losing market share, the other onenessly must be gaining or could it be going to a lumber lick kwi date liquidators? >> you could argue that lowe's is trading water or in some categories losing share. i would look at the bifurcated sales results and you can satisfy home depot is the clear share gainer. >> how do the dividends compare? >> from a dividend yield standpoint? >> yes. >> they are both doing a nice job of returning cash to shareholders. both dividends would be stable with that free cash flow. i would point out, we have to remember there is a wild card if they are going to make this acquisition is up in canada.

and that's something that investors might push back on a bit. >> alan, to that point, canada has been a growth area for lowe's and they have been opening up more new stores, although at a slower pace than many expected. to peter's point that the dividend could be in jeopardy or paired back or stuck in the mud, not raised? >> we don't think the dividend would be in jeopardy. the bottom line is that market share up in canada is very similar to what we've seen in the united states. and basically, home depot has a 15-year head start with respect to moving up to canada and that gives home depot a significant competitive advantage in terms of procuring the proper real estate over lowe's. so given the operational missteps at lowe's right now, i would like to see them take their sights off of that for the time being and stabilizing the business in the united states

first. >> and a quarter of a billion dollars was a suggestion of what they were willing to offer for it. guys, thank you. alan rifkin and peter keith. thank you. aetna has struck a deal to acquire coventry health. as this marks the second major deal in the medicaid space this year, who might be next? seema mody has the details. seema? >> that's right. as mark bertolini said, it's a strategy employed by the marriage jorp insurers, a big opportunity as millions more will be covered with health care reform up held. and cigna taking out healthspring for 3.8. the big question on the street is, who is next? some of the mid-sized managed care players, like wellcare,

medicaid players molina and centene are all speculative targets. consolidation definitely seems to be a trend we continue to see in this space. the managed medicaid market will reach $355 billion by 2019. we saw consolidation in the pbm space. brian, back to you. >> seema, thank you very much. we should know, rich peterson just sent this over to me. the coventry deal represents the largest deal in the managed health care business since obama care was signed into law march 21st, 2010. the biggest deal so far. >> you wonder if there's going to be some pushback in congress. we have obama care designed to expand these programs. 30 billion more people and arguably, politically, they took a beating during the entire process that the health care law

was sculpted and you talk about who may next. will congress allow a next? >> i don't know. >> there's a lot of things i don't know. >> why would they not allow that? >> because we start to see a roll-ups of many of these programs. when we interviewed him and said, how can you control these costs when the costs have just soared, the insurance companies are really going to have to buckle down on some of these programs which maybe the participants in them are not as used to dealing with an aetna rather than a smaller company or the government more than an aetna. >> interesting point there. all right. got to take a break here. bmw looking to be the first luxury automaker with the official kickoff of the now drive program today in california's bay area. so how will the premium car sharing compare in back in two. people have doubts about taking aspirin for pain.

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all right. one of the five worst songs of all time, that leads us into our neck segment with mustang, not a bmw. the first ever luxury automaker to enter the car share gain. our own phil lebeau joining us with a first on cnbc interview. phil? >> i'm joined by ian robertson in san francisco for the official launch of bmw's drive now program and ian, we've talked about this in the past on cnbc. tell people why you believe this drive now program is the right program at the right time in san francisco. >> good morning, phil. we've had a lot of success since the drive now. it launched 12 months ago in europe. we have it in munich, in berlin. i think san francisco is a good place to start that. we launched the program just a few weeks ago and it's all right picking up a lot of interested

parties. the one thing here that is interesting is we're only using electric vehicles at this moment in time as well. this is really much a development on the way to where we are heading with our i brand which will hit the streets in the latter part of 2013. >> ian, you're launching this when the right share industry, if you'll call it that here in the united states, it's limited growth, so to speak. a lot of people look at the ride share industry in the u.s. and say, sure, it might work in san francisco, in boston or new york, but overall there's really not a lot of growth there. what do you think? >> you know, what we find now is that in the city areas in the metro areas, particularly where people are using different modes of transport. if i look at munich and it's a relatively small city by national standards, but a lot of people come into the city by using the underground trains and overground trains and pick up a car and drive for 15 to 20

minutes, get to their point of destination, leave the car, walk away. there's no hassle. there's no -- nothing for them to do apart from they got charged for by the minute they used. once this really starts to be part of a normal traveler, then it really does pick up. we expect that here in the united states the city environment is really where it is going to see the growth. this, of course, is not something that we're in for for the next few months. it's a long-term strategy from ability solutions but mobility where people still want to have their individual space, their individual time when they want to travel, et cetera, et cetera. >> ian, you mentioned europe and i know you have this program in berlin. you have it in munich. let's talk about the european economy rinow. you're over there half the time for your job. what's your take on the economy in europe? has it bottomed out or do you at least see a bottoming out there and you can say, okay, we think we see things improving? >> we talked about this a few times in the last year or so.

if i looked at 2011, europe was a tale of north and south. the southern european countries were quite difficult, quite challenging. northern european countries last year were moving forward but at a relatively slow pace. this year i think you could say that the slow pace is right across the whole continent now. having said that, you know, the uk has performed quite well this year. germany is holding in there. some of the low countries, n netherlands, belgian, they have seen growth. the southern european issues are not something that are going to turn around this year, probably not next year. so we see a flat to sideways movement in the market over the next 12, 18 months ahead. >> quickly, about the u.s. luxury market, your sales are up 9.5% this year. you're a smidgen behind

mercedes-benz. have the luxury buyer in the u.s. paused and said, this is about what we expected? >> you know, we see the u.s. market moving positively ahead. i was in detroit in january and for the first time in three or four years we were having discussions with our dealers where they were saying, the market is going to be higher than you anticipate. that's really come through. i think 42, 43 million cars in the luxury market, we're launching a new product here. the four-wheel drive three series. we'll anticipate that we'll see good growth in the months ahead, september, october, november, december. as it goes into 2013, again, we anticipate that the u.s. market will continue to move forward. so in a global environment where we do see a number of challenges, i think the u.s. is one of the brighter spots at the moment.

>> ian robt robertson joining us where the car is launching the drive share program. you heard what mr. robertson said, they are fairly optimistic for luxury sales here in the united states. >> thanks, phil lebeau there from the latest market sector. let's get a market flash from courtney reagan. courtney? >> taking a look at a data center service center, up 1% today. bank of america, merrill link raising the target from 185 despite the record bookings in the first quarter. second best bookings in the second quarter. bank of america, merrill limpbl raising the price target on equinix. the tech titan that just won't stop. apple shares hitting a new all-time high this monday morning. ipad mini rumors.

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almost an hour into trade. good morning if you've just joined us. here are the stories that we're squawking at.

10:28 here on wall street. new all-time lows for facebook. shares falling as low as $18.75 on this morning session. on the retail front, ross and tjx hitting-time highs. we are watching shares of apple trading at new all-time highs this morning. the new altime high with 658.25. toni is a senior analyst. great to smeek with you, as always. >> my pleasure to be here, melissa. >> with the stock at a high, i've got to take the bear angle for a moment. if we' expecting two launches of a new product a. mini ipad and some sort of tv device, could that pressure apple's

expenses in terms of ramping up the factories and then also marketing? >> well, in general, the iphone is a very high margin product. and so historically the gross margins on an iphone have been around 60%. so even if this is a fully featured iphone and there are significant incremental costs associated with it, we're still looking at a product that may have 50 to 55% gross margins which is much higher than apple's average. selling more of these devices pushes up margins, which is a good thing. >> toni, brian sullivan. i've got a more basic question. if you have an iphone and you have an ipad and the iphone, a couple inch screen, why do you need something in the middle? i've played with some of these seven-inch tablets and it's not much better than my iphone. why would i purchase such a device? >> well, look, there's two perspectives why people may want

it. first is, it's less expensive but still offers more of a web or entertainment experience. so a seven-inch screen is, you know, three times larger in terms of square surface area than a typical smartphone. and so you really can have entertainment or reading, whether it be books or web pages, in a much more elegant way. so the first one is just, you know, a -- >> you don't think it's going to be a bust or a flop? >> no. i mean, look, we see from what amazon has been able to do and there has been an initial warm acceptance, at least critically, for google's new seven-inch tablet as well. so we do think there is acceptance and demand for such a product. >> 20 million ipads sold in the first year and is that your greatest concern with the launch

of this new particular product, that perhaps it will launch sales of the iphone or perhaps the ipad? >> yes, i think that's certainly a concern. because the economics of a smaller ipad are not particularly compelling for apple. we think they are largely doing it for strategic reasons and the reasons being that we think there is consumer demand for this lower price product. there principle competitor is apple and google -- i'm sorry. amazon and google are offering such a device. apple wants to have a lower end, more affordable ipad to introduce people to the ecosystem and get them on the apple platform. i think they are doing it for strategic reasons. >> isn't that a real departure from apple that's been driven by innovation to say that they are launching a product because of competition from google and amazon? that's quite a different story

from other launches in year's past. >> i think that's a fair observation although we could also argue that historically apple, especially with the ipod, has a pattern of introducing a product and then making it more affordable over time. so i do think this is a case of apple saying, we think there are customer segments, parcularly outside of the u.s., where people do want a more affordable entry and we're seeing evidence from our competitors that there is success in demand for such a product. >> toni, can i get a feeling for where you are on your price target which is roughly 10%. why have you not been attempted to raise is towards the thousand dollar level where many of your rivals are positioning their price targets and what worries you about apple the most at the moment? >> sure. on the price targets, it's what

we believe apple's stock is worth today. we still believe it's considerably undervalued today. with better earning going forward, we raise our price target along with our earnings estimate. in terms of worries, i think there are a couple. the first is, apple has to execute and have good products. so there's a lot riding on the iphone 5. it accounts for 70% of the profits of apple today and so that product has to work. it has to work seamlessly and successful. when we have something prevalent with a product, you know, i worry about the ability to execute and make sure you always have great products because their product concentration is so strong. >> i'm sorry. i didn't mean toint ru interrup. or even if you get a two to three-week delay in the launch could have huge implications, i imagine. >> certainly in the near term. i think there's a lot of investor expectation. apple stock typically has big

run ups two months in advance of product cycles and we're seeing that right now in the movement with the stock in the last three or four weeks. if there's a delay in that, or say the actual shipment date is going to be later, that would have a negative short-term impact on the stock. long term, it's a timingi event not something that is fundamental unless there's a problem with the product. >> toni, thank you for your time. great to speak with you. >> my pleasure into dow kicking off the week with a 4 1/2 year high and s&p sitting with a four-year high and with six straight weeks of gains, when are investors are going to start to believe the rally? it's a good question. because the rallying has left people stranded at the bus stop. >> yeah. do you believe in it? do you buy in? and if you don't now, when do

you? is there going to be an opportunity to do some bottom fishing? look, people are looking at all of the normal macro data. they are looking at the euro and the fed minutes to come out later. what are other things that they are focusing on? the outcome of the election is critical. some folks are iing this, as we were talking saying, look, is the coventry aetna deal an indication that people are buying into the possibility that the republicans might take over and repeal health care? might there be implications on that? >> we talked to the ceo. we asked that question to him. i asked him specifically, do your forecast for earnings secretion depend at all on who is in office? and he said no. it still doesn't change the traders -- >> maybe what he said was, i'm certainly giving you what the guys on the floors are focusing on whether they are going to buy in, whether it's republican or democrat. i think the other thing is the credit markets. look, the credit markets have been so strong.

people have been thinking that they are due for a pullback but another school of thought is, if they are willing to go into credit markets at these levels, sooner than later they've got to get into equities. so we're going to see a real breakout. >> we just had spending bill for president obama pass. that could trickle down to ink ger sole rand. wouldn't a romney/ryan mit be worse for the market in terms of austerity? >> this has been neglected in our country and there's something that we need to do to remain globally competitive as we see imports coming from different areas, not just pacific rim but mexico becoming a bigger player. i think what the investors that i've been talking to, brian, have mostly been saying that the president notwithstanding the job he's done, has left investors flat. people don't feel he can take it much further. the potential for a romney

victory seems to excite investors more than four more years with obama. these are some of the things that people on the floor are talking about. >> let me ask you more objectively with the rally that we've witnessed recently, it seems to me that the breadth of the move is encouraging. russell up 4% now over the month to date, the transport up 2%. that would indicate that while the headlines are not moving as quickly as people wanted, the bulk of the mark can ket is coming behind it. that's very positive, isn't it? >> it is. even though we've had a run-up in oil, the gas prices have become a major talking point. that's not going to choke this off any time soon. you have the underpinnings for a move to the upside. you're better off to position to the upside notwithstanding today's activities. >> the biggest thing that has happened is the potential for

europe to actually inoculate itself. the spanish market is up 25% since he made those comments and that solves the problem and that's a game changer moving forward, isn't it? >> i think so, simon. people have been focusing on that and they have been focusing on the negative. now that they can start to get some confidence that that situation will resolve in some way that won't be painful, we're in a spot and we can cross that off as something that blows many market up. commitment to infrastructure, fundamentals looking better and transports coming in behind the industrial average all positive indications. >> gordon, thank you very much. >> thank you. let's go to a market flashback with courtney reagan. >> thank you, simon. airline stocks not because of what is going on with energy prices but rather insider buying. deutsch bank points out that a number of executives, the ceo, cfo have all bought shares and

at delta the cfo bought shares here. we're seeing the move to the upside. it hasn't been an easy go, especially with deutsch bank notes that there is work. for now we're seeing shares higher. melissa? >> thank you very much, courtney reagan. shares of facebook have been trading lower, fresh all-time low in two doday's session and low was $18.75. >> i don't remember that far back. any way -- >> up next, one of america's favorite stocks, exxonmobil as it hits a new four-year high on friday's session. so should you be a buyer or is now the time to take some profits? we've got a bull/bear debate, next. [ male announcer ] let's level the playing field.

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we joke a lot about apple. let's not forget that exxonmobil is the world's second largest company by market cap. it pays a dividend, more importantly, to many of 2.58% and the stock is trading at or near a four-year high. we're celebrating the most widely held american stocks today. it's interesting to note that no wall street firm rates this stock a sell. an analyst with raymond james has a price target of $92 and jason is with macquarie. i think more importantly, jason, it's about the strong free cash flow for you and the distribution to shareholders. >> i think that's exactly the right point. we t exxonmobil can continue to grow the dividend. the yield is better than what you get with the s&p 500.

there's a safety element as well. exxonmobil is going to have no problem paying out this kind of dividend even if oil prices retreat to a $75 level. >> how would you describe your interest? >> the free cash flow metrics, i agree with jason, are very appealing. keep in mind, raymond james' view is below consensus for 2013. we're looking at $80 brent, 65 wti, and that's one of the lowest in the streets in that context. exxon screens very well. this is not a stock for a very bullish view on oil prices. if you're a bull on crude, there are more aggressive, you know, generally smaller cap names in the oil and gas arena for people to focus on. exxon is so appealing precisely because it's defensive and tends to outperform when all is going down, not when it's going up. >> jason, what about its

exposure to natural gas? it is the largest natural gas producer i think i'm right in now saying as a result of the acquisitions and ceo has had a mea culpa on that. how does that play into your view of the stock? >> moving forward we think it's an important source of production and reserve growth for the company. i would say that we do think that natural gas prices will stay relatively low for another couple of years because of the advi visibility that we have on supply. i think exxon made their decision based upon a ten-year outlook and does view natural gas as the fuel of the future as do we. i do think that the position that they carved out in shell gas is something that is going to be very important for the long-term story here. >> paval took the time to explain exactly where exxon fits in his grid of stocks that he covers. where does exxon fall, in your context, jason? >> i do agree generally with the comments that paval made.

we are a little more constructive on brent oil prices but if we're going to be aggressive based upon a better oil price, i'd rather go with chevron. i think the safety characteristics and coming back to the good dividend yield are still good reasons to have exxon in a portfolio right now. >> pavel, let me ask you the question about the exposure to natural gas. are you as constructive as jason is? >> well, look, in retrospect, it was not a very good deal. let's just call a spade a spade. two years ago, natural gas was close to 5 bucks. to date it's 3. in retrospect, exxon would have been better off waiting for a couple years to make that acquisition but what's done is done. look, at this point, yes, it's diluted in today's gas prices but today we think there will be slightly better natural gas prices in 2013 and better beyond

that. one more point that's important to keep in mind, exxon, if its chemical business was a stand-alone company, it would be the largest in the united states. it's a natural hedge against lower crude prices and lower natural gas prices. so this is one of those things where earnings tend to actually go up as commodity prices fall. remember, for chemicals, oil and gas is an input, not an output. >> guys, thank you for joining us. paval and jason, have a great week. thank you. "the wall street journal" is reporting that four groupon investors have sold many or all of their shares, so shares hit fresh new lows today. what is next for the discounter and has it lost fans for good? first, rick santelli, what are you working on for the next big hour of "squawk on the street"?

>> it's a very key topic when you look at investors against the backdrop of various actions of government and government agencies. today we're gug to talk about the willingness of china, of the fed, of the ecb. what does that mean for traders? because trust me, there's two sides to every trading card, even when it comes to government's willingness to step in. it's something you're born with. and inspires the things you choose to do. you do what you do... because it matters. at hp we don't just believe in the power of technology. we believe in the power of people

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uneven flow for paul ryan and his campaign trail today. a town hall starting in manchester, new hampshire in a few minutes, this as the republican national convention is days away. john harlan joins us from washington. i'm sure they were onlike to talk about the economy and their plan and all this stuff. -of- feeling they will be talking about the comments from one todd akin today. >> they will be talking about those ridiculous comments by akin. scott brown, the massachusetts incumbent republican senator has just called for todd akin to withdraw from that missouri senate race. you see republicans turning on

what akin had to say. that's in the region of the country where romney and ryan are campaigning. that's certainly going to come up. >> he should. akin should step down, right? the republicans are now going to distance themselves from the guy anyway. but john, let's talk about it. romney and ryan would love to create a message of we're the best for the economy, we've still got 8% unemployment. every time they go out in public they are asked about either now todd akin or tax rates. when do the republicans finally get to promote their own agenda because they are back on their heels big time? >> well, one of the things that they are trying to do right now is neutralize democratic attacks on paul ryan over his medicare plan. so you're seeing a furious back and forth between the two sides, democrats seizing on the budget, especially the earlier iteration of his budget. republicans responding by accusing the president of

raiding medicare to pay for obama care. some is getting in the way of the economic message. that's one of the unfortunate aspects of the ryan choice from a republican point of view. i think the convention will give them a chance to reset and on the personal front give mitt romney a bit more definition and warmth in his public image which he hasn't had so far and get that message back to the economy which they think is their hold card in the end. >> the front payable of the "new york times" today paints a very interesting picture of how they are preparing for one week's time. in essence the relaunch of romney to counter some of the criticism. it'snotable, john, for example yesterday he was inviting reporters to attend his church with him. there is clearly now a strategy to -- in many sense it's reintroduce the team to americans, it would appear, from this article. >> they certainly need to. if you look at what's happened in the polling, under the heavy assault from democrats and president obama's campaign, mitt romney's favorable rating have

gone down. he's really been tarnished by that. he didn't have the luxury during the republican campaign when he was trying to look tough and more conservative than some of the ople battling him for the right to introduce himself in quite this way. he was also cautious about the mormon thing because so many conservative christians looked ask, ance on the mormon faith. now on his terms before a huge audience. >> thanks for your time from washington. some final thoughts this hour on the markets, apple, facebook and much more. stay with us. ♪

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and they danced. see what a raymond james advisor can do for you. in terms of sectors we're watching financials all across the board higher, morgue sacks, jpmorgan. jpmorgan citing strong earnings in the pipelines, raising numbers on a lot of stocks. we do see that group helping. >> is it a housing? >> mortgage originations are strong. >> interesting. interesting.

inevitably we work our way to "street signs" this afternoon, brian, i feel having two hours of you on the television, we have a inkling. >> you do but viewers don't. that is a fashionable back ground. 8.calligraphy font. >> did you do it yourself? >> i did. >> people on 401(k) so desperate to make money, the average balance is $37,000 among many retirees for single person a little for house old. people are day trading those. plus apple should buy who? tebow. apple should buy tebow. >> why? >> you've got to tune in to "street signs." thus the tease. >> i think that's a silly idea. i won't tune in. buy tebow. yeah, right. >> did you hear the clicks, clicks around the world turning the tv on.

>> that graphic has trained millions of people on "street signs." >> the graphic, crossing your arms in the background. >> in the back with a floating head. >> can they get more viewers without the photographs on the photographic. >> i think the plain white graphic will bring them in by the millions. >> brian, good to have you on this show. >> see you tomorrow. >> see you tomorrow, this afternoon. meantime, let's get to it. here is what you might have missed if you're just tuning in. >> announcer: welcome to hour three of "squawk on the street." here is what's happening so far. >> paul ryan's plan is flawed because it just puts all its chip down on believing that competition will reduce cost and there's no evidence that actually works. >> the reason i am so thrilled with the paul ryan choice, it is driving the discussion and will drive the discussion from now till november about fiscal and economic issues, which is what we should be talking about. >> it is true this is a

disrespected rally. all the great rallies i've seen since 971, since i started trading, disrespected. people don't think a ceo can matter. those are people who don't understand retail, mickey drexel who comes in and changes the direction of a company. whether it be frank wright who comes in and res rekts home depot, it can happen. >> medicare and medicaid drive a huge portion of our debt. health care programs around the world are busting budgets on governments. we think this is a way to get at the cost structure. we believe these programs improve care, reduce costs and provide a more effective outcome. >> facebook is going to have to grow at an incredible pace in order to justify it's evaluation. if anything, it looks like the growth curve for facebook's revenue is actually decelerating as we all know. so if anything, my $13.80

projection might be too optimistic. >> thank you. that's what you've missed so far on cnbc. i'm simon hobbs with melissa lee. let's check the markets, slightly lower as we start another week of trading. an awful lot ahead to get to 23 points on the dow. s&p slightly lower as well as you can see. gena lot of headlines this morning with regards to facebook in the red again today. in fact, falling to a new all-time low. now more than half its value destroyed since it went public in may. this is investors brace for 1.4 billion more shares of the business to come to market potentially through november as those lockups expire. cough entry health and aetna, two of the biggest gainers after aetna agreed to buy coventry in a $5.7 billion deal. coventry is trading at now four-year highs on that news as you can see. >> so let's get to the road map. shares of best buy taking a big

hitt hit today after the company names a new ceo. reports talks founder richard schultz would take the company private have broken down. is the new ceo the man to turn it around for the struggling retailer, plus how you should be playing the stock. apple seemingly unstoppable, hitting an intraday high. a shareholder's view on the future beyond iphone 5. less than 30 minutes away from european close. shares falling as bc down plays bond buying. we'll show you how it can affect your money. groupon losing major early investors. what does the company need to do to ensure survival. the boss of all segments is back. that and much more coming up in the next hour. >> best buy, the retailer announcing it names hubert joy y and colson as ceo. electronics chain trading sharply lower partly because of, of course, the founder, it would

appear, has now withdrawn an offer. or at least he's decided not to do due diligence on $24 to $26 share offer. a strategist at capital marks. good morning to you. >> morning. >> presume earl is the offer still around? where are we? >> there's a lot of posturing going on on both sides right now. he said he's withdrawn the offer. my sense is he'll be back. they are pretty -- i still think they are pretty committed to pursuing this. it seems there's a lot of negotiation going on over the weekend about the standstill agreement, length of the standstill agreement. i think quite frankly, the management at best buy came back with a pretty reasonable offer of waiting until january before you can get too aggressive or too hostile here. >> in the meantime, how concerned should we be that potentially the value of the business may be falling. i see not so long ago you were talking about a possible buyout

at $30 a share. are you looking again at that? >> i still think that's a reasonable number. the numbers can still work based on the cash flows, you know, that the company has right now. we've talked about this a lot of times on this show. i just think that there's just this overall negative view of best buy. i think they are in some really tough product cycles but the franchise remains fairly intact or pretty much intact. >> the stock decline of today's session down 7% at this point seems to be mostly on this idea that talks between best buy's board and schultz have broken down. i wonder what your take isn this new ceo and whether that factors into your belief it is a takeover target of $30. sounds like it doesn't make a difference who is the ceo for you to believe it's worth $30. >> well, i'm using that based on what the cash flows are and what the franchise is worth. i don't know a ton about him at this point, other than the

biography i've read this morning clearly an accomplished guy. clearly somebody who has experienced turnarounds. that will suit them pretty well. time will tell. i think they need a leader as much as anything. this is a company i think has been beaten down in a lot of different respects. publicly, privately, you name it. i think somebody, a leader who can come in here and reinstill confidence in the management team is probably as important as anything now. >> what is the strength of the franchise? we thought this it might be geek squad. we thought it might be -- there were unique selling points they were developing then you find out they are laying off. >> when home depot is going through issues in the early part of 2003, so the three things they had was a brand name, real estate, and a balance sheet. i think best buy is a strong name and iconic brand name. balance sheet and cash flow remain strong. real estate is probably a bit

more of a mixed bag of great real estate. probably some too big out there. not probably, there is some that's too big out there. they have some key issues that are going to help them. product cycles are critical here. they are in some pretty tough product cycles out there in consumer electronics right now. >> it's good to talk to you. >> pleasure. >> thank you for kicking off your week with us. david from capital markets. >> editor gary comiskey on why the dividend is not as positive as some thought long-term? why? shareholders are thrilled with the increase in dividend. >> a minder. you've heard me, melissa, say a lot of times, 55% in long-term equities is dividends reinvested. a lot of people forget that. pointed out friday there might not be long-term investors left with 8-month average holding period. remember, if a company generates free cash flow, dividends and

distributions although overall market return 55% of it for individual stocks, over the long-term best use of cash flow is not dividends. take a look at converted cash flow free flow yield pyramid. if you can recall the worst use of cash is sitting on cash. basically you do knowing. m & a, you've heard me say nine out of ten deals don't work, don't add anything to shareholders over the long-term. buybacks a good use of cash. if you look at history again, most of the companies have bought back massive amounts of stock, shrinked market capitalization, earnings went up as a result, pe did not expand. you look at the best performing free cash flow, a lot of people talking about cisco over the weekend. that's why i wanted to revisit this chart. dividends and distribution, yes. if you look at the best performing stocks over the long period, it still is organic growth. when a company is utilizing free

cash flow to pay dividends and distributions, regardless of what sign they are trying to say to the market, the interpretation continues to be over the long-term they don't have the organic growth opportunities, new markets, no products. that is what you want to see. while cisco news was good news in terms of redeployment of capital, unless you think history is not going to repeat itself, organic growth is the way to go. >> haven't investors turned in the towel, when it comes to specifically haven't they essentially thrown in the towel on a strong organic growth story. this is rec flyiognizing the fa they can support the stock by recognizing dividends. >> absolutely. >> not bad news necessarily. >> it's not bad news for cisco. if you were a stock picker, you're going to try to find organic growth names. there is an asset class -- there is an asset class of total return investors. but if you're trying to pick 10

to 12 of the best performing stocks over the next five years, it continues to be the organic growth. say again, simon. >> i think to melissa's point and yours, when you say optimal free cash flow, optimal to the future of that business. what might be optimal to an investor who has got a universe of stocks to choose, the dividend divide might be different. i think that's the point you're making. for me, if i'm looking for retirement income, cisco is more optimally -- >> if you're objective -- we've got to go. if you're objective, need income, that's a different classification. if you're trying to find stocks for capital gain, this pyramid continues to be the best way to find 10 to 12 stocks if you don't want to closet index, beat the market. that's what i want to remind people of cisco last week. >> scott wapner back to the breaking news desk headquarters with the latest. >> thanks so much. the wait is finally over. according to the associated press, augusta national golf club has admitted female members

for the first time in its 80 years history. two female members have been admitted to augusta, condoleezza rice, former secretary of state and also darryl,la mora, may no familiar but served on many boards, university of south carolina wing named after her. hca, hospital corporation of america. martha stewart living as well. the south financial group. nps group. well accomplished on the corporate board side. she was the first woman profiled on the cover of "fortune" magazine as well. this is a big day. what's interesting to note here as well. no virginia romettei from ibm. a long-standing sponsor of the augusta golf tournament. it's worth pointing out it's not known if she was extended an invitation and turned it down. >> she clearly didn't want to

make it a priority. incidentally very casual look. >> when breaking news happens you run to the news desk no matter how you look, abandoned. >> abandoned? >> they can be abandoned if the have to be. >> you see that? >> he's a television pro. >> rick santelli in chicago for what he's got for the santelli exchange. good morning to you, rick. >> good morning. wow, augusta let's in females. maybe it's about time. i can only think of one thing, four new bathrooms are going to be needed right away. if we look at central banks or countries in general like china, i remember many years ago when i traded, we were taught that as the country deteriorated, large banks or large businesses, twl balance sheet deteriorates, there was this transfer.

ultimately those negative toxic things would over time in ways move to the government's balance sheet, corporations would clean up. that's kind of a stimulus argument when you think about it from an accounting standpoint. indeed, a lot of money then gets moved onto balance sheets. governments want to get things going. if we look at china, they have somewhat intentionally inflicted some tightening. maybe it's hard to gauge exactly when to stop. when you look at gdp growth rate that is much less than it was six to ten quarters ago around seven and a half percent, jiabao talking this is their new target, many think this slowing can't be looked at in nominal terms, we have to look at the global. we've talked about this. all the different countries contribu contribute. from a global standpoint there's so much horsepower. doesn't matter which country

donates horsepower, from a global perspective there is less of it. china, we thought it would be the real estate market, what we read on the front pages. as it turns out, the story is totally not written yet, it's the general chinese economy. real estate hasn't done as poorly as many anticipated. with regard to our fed and our government, back to the money side of this, i heard brian talk about earlier the transportation bill. it isn't as though infrastructure isn't a good thing. it boils down to taking this from taxpayers to build the infrastructure. if somehow along the way it gets whittled to the end. remember that shovel ready but really isn't shovel ready, infrastructure and issues is the buy and sell side get reversed may potentially accomplish the only thing that matters. we need investors to come back to the equation. look at volume or sovereigns in

europe, investors are nowhere to be found. back to you. >> thanks so much. an important milestone has just been crossed, apple passed microsoft's peak market from december of '99 with apple surging to fresh record highs, 660.73 new high on apple up by 1. %. apple eclipsing microsoft's peak market capitalization hit back in 1999. >> most highly valued business in the history of man. >> amazing. >> back in a minute with more. [ male announcer ] at scottrade, you won't just find us online, you'll also find us in person, with dedicated support teams at over 500 branches nationwide. so when you call or visit, you can ask for a name you know. because personal service starts with a real person. [ rodger ] at scottrade, seven dollar trades are just the start. our support teams are nearby, ready to help. it's no wonder so many investors are saying...

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let's get back to apple trading a new all-time high, eclipsed microsoft's peak market cap of 6.89 set back in 1999. capital advisers growth fund, owning 36,000 shares of apple. channing, always a pleasure to speak with you. >> good morning. >> the challenge for people that hold apple in the portfolio, the discipline to manage that position. where do you stand on that? when you see such a huge rise in market capital of a company and it becomes a bigger percentage of your portfolio, are you trimming your position to keep it a certain percentage of the total? >> we're not, melissa. back in july when i was on, apple was a $700 to $750 stock in the next 12 months. capital buyers growth fund taken back by how quickly the stock has accelerated. two things are really behind that.

one, there's now more clarity on when that iphone 5 is going to launch. everyone expecting we'll get an announcement september 12th, probably shipping shortly after that. secondly when we talked back in july, the ipad mini was more of a concept. now there's rumors that is probably going to be available in a season. it makes sense. investors are trying to get ahead of these product announcement. as we said before, a long runway of growth. we think the christmas season is an absolute record for apple. >> evaluation i'm sure many apple bowls reasonable with this ascent. i'm wondering if you are concerned at all about the ascent in the rise in the shares of apple just from a numbers perspective, when take you a look at the gains made in the past five weeks or so, they are staggering. would you feel better about the stock if it were a slower, steadier climb. >> the stock is going to do what it's going to do. it's a parabolic move.

i know david mentioned a concern about market cap. we worry about that. we're long-term investors, we expect apple to continue to perform well. one of things we continue to focus on is the product categories. if you look at the smartphones, we expect a billion to be sold. we're at 500 million now, apple controls 25% of the market. the growth runway in phones is very large for apple. this is their highest margin business. we're excited about that. again, if you look at tablets, this is enormous market, too. it's growing, expect it to triple, quadruple. apple has 50% of this market. >> it is the iphone that is essentially a profit stream. we're hearing earlier in the program that 70% of apple's profits approximately come from the iphone. so yes it has to do well. the danger that iphone 5 disappoints suddenly samsung can become for those kids a more

attractive model. the risk and the reward is both huge is all i was going to say, channing, essentially. >> i would agree with you, simon. the iphone is a driver, highest margin product they have. look at the competition. i know the android is a formidable competitor but apple continues to put out products. this new launch of the new phone is going to be faster, going to be sleeker, it's going to have a better siri, maps. they continue to stay ahead of the competition. really until proven otherwise you've got to stick with apple. now, would i make it a huge position in the portfolio at this point in probably not. it's about 5.3 per position in our portfolio. for new investors i'd step in, some volatility. you want a toe in the water this christmas season. could be enormous for apple. >> quickly, as we flash headlines at the bottom of the screen saying apple surpassed and eclipsed microsoft's

evaluation. you mentioned the market cap concerns you. why should it concern you if you see these lines of growth and have visibility going out and evaluation overall is low. should the market cap argument be thrown out the window? >> i don't think so. how we look at it, it is important to watch that. how we look, look, a big runway in these categories. cash flow will continue to grow. competition will get better, technological advantages will slow. price points will come down. apple might be in a situation where they are forced in a new category like tvs that we're not very excited about. eventually every technology runs into this. apple will run into this problem. we don't see that probably for 18 months to 24 months considering theres so much growth in the category. right now, melissa, we're not too worried about the market cap. it will become a challenge in the future. >> channing, great t speak with

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welcome back to "squawk on the street." i'm courtney regan. look at the shares of best buy. continuing headlines, founder or co-founder richard schultz is making the statement about the new ceo best buy named, shag hu joly. we know he's disappointed best buy terminated their talks. he says it was an bankrupt public termination of private discussions. shares down 7%. we're going to watch this all day long. this is not over yet. melissa, back to you. >> certainly will. courtney reagan, thanks for that. we want to touch back on something we brought you. augusta national admitting its

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countdown is on. seconds to go to the close in europe. let's bring enzymon hobbs.

>> the big news overnight coming into the end of the session has been this report from the german magazine that at the next policy meeting of the european central bank, they will discuss targeting peripheral bond spreads. let's have a look at the spread. >> the european markets are closing now. >> now, that would be -- that type of approach entirely consistent with what we've been saying on this program for two or three weeks. they will define the battle. the battle will be drawing lines in the sand for the bond market. you've had a statement from the ecb which meant that the assets have fallen back in europe today. the ecb issued a holding statement basically saying it's wrong to have the discussion when the meeting hasn't taken place. the ecb statement means absolutely nothing. it is also not terribly relevant the bank in monthly reports says it's opposed to bond buying. it's been opposed to bond buying for as long as anybody remembered, two germans resigned from ecb. the important thing was merkel said when she was in canada

recently that she was on the same page. there would be potentially political cover from merkel to draw this sort of line in the sand. so the asset markets continue to rally on what they are doing, initially that intervention on the 26th of july and so on through today's session. i wanted to mark the way in which from that date, the 26th of july when he said just before the olympics started in london they would do all that was necessary to save the euro and it would be enough that we continue to get some sort of movement to that end or so it would appear. as such you can see that the yields continue to fall here, for example, on the spanish ten-year today. it's also true on italy. there you can see it's not as dramatic a move, basically bottom our way along there and conversely as the peripheral bonds rally and continue to right lanely, the center of europe is falling and therefore the yields are rising in, for example, germany. let's have a look where we are

there. there you can see the way in which in broad terms they make gains. that's the period, moved substantially higher, 20 basis points. rally, talk about the stealth rally in the united states. it's worth remembering one of the underpinnings on what is happening in the new york stock exchange is the rally in european assets, european stocks led by spain during that period. the spanish stock market since he first opened his mouth to say that is up 24% despite the fact we've fallen off slightly today and top 50 blue chips around europe during that period of time are up 14% as you can see. here on in, the focus turns very much to greece. we start having summits between the greece prime minister, the new agreement prime minister first of all meeting ahead of the euro group on wednesday, thursday angela merkel and the germans discuss the situation with themselves, then europeans

with merkel, then europeans with hollande. they will ask for more cash, the drm political establishment seemed to post to that. two things to mention, back up the idea greece might be able to default and still not be kicked out of the eurozone. the first, a meeting on wednesday, said totally if they totally refuse austerity demanded will they be kicked out. one of the ecb board members today said they could deal with kicking out greece but would be hugely costly in terms of unemployment and therefore should not happen. i think the discussion is about keeping greece in the eurozone and whether or not they get that extension. back to you. >> thanks, simon. want to check in with jackie deangelis and an update on the commodities market. >> watching wdi trade lower.

earlier we saw brent trading on the back of good earnings, positive data out of the u.s., some sentiment keeping it up. pretty much seeing profit taking here. take a look at the wti brent spread trading narreely, seeing that wide be now. brent and global demand driving markets ahead of december's foc meeting. also take a look at natural gas trading higher by less than 1%. the range we're looking at is $2.50 and $3. if we break $3, the next stop is $3.20. we need a catalyst for that. last but not least, metals, gold in negative territory. other metals moving higher except copper moving lower, china and ecb's caution on bond buying. melissa, back to you. >> thank you, jackie deangelis. let's check back in with gary. you're watching apple among other things. >> let me run through some

things, apple, microsoft, talked about in terms of value. let's not forget when we go back to 1989, apple trading 50 times, market capitalization $600 billion close to 45 times earnings. a different place and time. best buy, a lot of news, a lot of reporters, you never buy a stock based on potential takeover, that's a losers game. do you guys remember how the equity markets traded in the summer of 2008, june 1st, summer of 2008, june 1st. there's a feeling out there if you walk around the floor, i asked a bunch of guys on friday, people think the s&p was down 15% in the summer of 2008. in fact, it wasn't. it was only down from june 1st to august 20th, down 6%. let's take a look at this summer, june 1st to today, up 7%. what's my point here? simon, what's my point? >> you like to save for a punch

line at the end. >> a lot of people believe, and i'm not saying i'm one of thelma lot of people believe european pushing things away for the month of august was simply to set thing up for dealing with all the problems that will resume in september. take a look at s&p for august 30th to december 1st, 2008. that's when reality came to be. that's when lehman brothers had to mark the level three assets. it was not the summertime, despite the fact bear stearns happened in march. those that respect the technicals say why is this happening in august? >> basically going back to the low volume, participants in the market. there's a pushoff of what you think is actually going to be this substantive news to the fa fall. that's what we saw in 2008. >> the feeling a number of situations would work themselves, lehman brothers,

aig, fannie, freddie. a feeling during the summer experience with that s&p chart things would work out. >> is this a technical point. >> it is. have you to respect technicals. have you to go back and say, just because we've had this move we've had over the summertime, we should not conclude european situation is soft. that's one opinion. a lot of people believe that opinion. >> watch out after labor day. >> i didn't realize we changed the sets. now we have a different background, when i'm looking over there, confused with the green behind me. my apologies. got the green now, the beautiful shot over simon's head. construction down here. construction again. >> always changing. this floor is always changing. >> anyway, let's check in with rick santelli he's talking mf gobble with a guest. it it away. >> this is a story that never goes away. some people are happy about that. a lawyer that represents thousands of customers of mf

global. james, last week when word came out department of justice basically didn't see any cream, i call you up and you said, i believe, unequivocably crime and fraud were committed. can you expand on that? >> sure, rick. according to the trustees' report, mf global was routinely using customer funds to fund intraday as far back as august months before the bankruptcy. that's a violation of the commodities exchange act. once their credit rating was downgraded, they just outright took those funds and wired them to jpmorgan to meet house calls, also a violation of the commodity exchange act. it's a felony and penalty of ten years in prison for the offense. >> the department justice doesn't see it that way. and everything we've talked about we've discussed add in finite um. is there a lot of differ.

>> no, you read the note. he talks about the fact he had the choice between going out of business and cheating. he decided to cheat for 20 years and steal customer money. sure, he put it in his own account. mf global, same decision, do we go to business or cheat. they cheated, broke the law, took customer funds to meet margin calls. >> edith o'brien supposedly has information. you must have information if you want to be protected to give it. you tell me they never even really went that route. they didn't give her immunity? they don't care she knows something that probably isn't good, that's it? >> by not giving her immunity, it's a way to stalemate the case, well, we don't have enough to prosecute it. earthquake holder's department of justice is the biggest enabler of financial crime in u.s. history. that's why way back in january we went to congressman grimm and asked him to write a letter that independent counsel be appointed

to the case. 65 congressmen agreed with him. >> i'm sure this isn't the end. the final question. i'm sure you believe crimes have been committed there. you're not going to let up. no matter what happens with the department of justice, you're goalkeeper for criminal prosecution. >> each has an attorney general, be it new york, illinois, iwashings idaho, and i will explain to them how to prosecute this case, how to cut through the jargon and confuse that tried to distract people and we will win. we will get a conviction. the next time a sociopath ceo says, do i go out of business or do i cheat, he's going to think about the president's biggest fundraiser in an orange jumpsuit in state prison. >> james, you sound like a committed man. we have to run. back to you. >> all right, rick. thank you very much for that let's get back to the markets and where we're trading down down 27 points. bob pisani has more. >> the letters i get, simon, the low volatility is killing us, low volume killing us, how can

we make money in this environment. there is ways to do that. there are exchange products that enable you. they come with caveats. that's one of the reasons i don't talk about them a lot. i'll show you the e-mails. everybody wants to play against the vix, low volatility. here is one popular vx xs, tries to track vix by owning futures contracts for the vix. this is down all this year, this is down all this year, gee, volatility has to go down. i might as well buy it hoping it will go up. here is the problem. you're not getting the vix. take a look at what's going on here. vix down. the vxx that supposedly tracks it is down 6%. the reason this happens they have to buy the front month contracts, futures contracts. i've been showing these vix futures krabts in steep tangles. put up the vix futures contract.

with the vix something at 14, if you go out a few months there's 14 on the spot fix, 18 in september, 22 in november, 25. that's a pretty steep contango. these funds, vxx has to buy the front contract. they are rolling over into these expensive contracts. a decay problem. you're losing money if you hold onto the contract. that's why i have a problem with these. if there's no change in the vix, 14, you continually lose money every single month. okay. why would anybody want to own these at this point? the important thing is for short-term trades they are not bad at all. if you think there's a sudden spike in volatility because the numbers coming out or european unions meeting, it's not a bad idea to try to play it. it's just long-term they are disastrous. what about the opposite of this. here is one i get a question about. the inverse of the vix, x iv

exchange product this year, look at this, up 116%. it's got exactly the same problems as the other one except in reverse. you're basically getting paid to make sure that continues. you get that steep upside. as long as that continues you're fine. you've got a problem if these start moving against you. overall, look at this, that's what you're playing against. by the way, one last point. why is there such a containingo here. these funds with volatility they own these. they have to roll over by owning them. that's why these things are so expensive now. number two, volatility issues out there, presidential election, europe as you were talking about simon. >> suggesting the calm before the storm. >> no, i was just simply suggesting -- bob, can i say, a lot of firms won't allow brokers to sell these products to their clients. you explained the exact reason why. decay of net asset value.

excellent report a lot of people don't understand when they hear they can buy the product, it will decay regardless of the underlying asset. >> i get questions all the time. it's one of the reasons we don't talk about it. there is an inherent problem with these vehicles. as long as you're aware of it. straight ahead on the program, best buy under pressure after the announcement, a, of the new ceo. the founder appears to be stepping to one side on the offer, implicit offer there was for retailer. we'll talk about that and groupon next on cnbc. [ male announcer ] when a major hospital wanted to provide better employee benefits while balancing the company's bottom line, their very first word was... [ to the tune of "lullaby and good night" ] ♪ af-lac ♪ aflac [ male announcer ] find out more at... [ duck ] aflac! [ male announcer ] ...forbusiness.com. [ yawning sound ]

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for the best summer sweepstakes. coming up next, one of our guests says we're going to 1500. as facebook falls to record lows, one of our traders explains why he just bought it and why you should, too. guys, i found out we ha the an lis who upgraded facebook today. simon, a tie and makeup go a long way now, huh. >> that's how we like to see you, scotty, dressed up. >> cleaned up. >> thank you very much. see you later. two other companies making headlines today. best buy and groupon p carmichael son's hubert joly named new ceo. groupon, venture capitalist are exiting the daily deals website. joining us now for what we like

to call of all segments, professor, good morning, to you. thanks for joining us. >> thanks, simon. >> if we were to parachute you in either of those two businesses, best buy and groupon, which one do you think you'd be more able to institute a turnaround, professor? >> well, i'm a professor for a good reason. i think i could actually do neither one. i think it's too early to say groupon needs a turnaround. we're dealing with social media business models that are pretty n new, we don't understand. when companies like groupon or facebook or zynga go public, they are not quite prepared for

the quarter by quite a few scrutiny of that process. i don't know if the business models are sustainable or not. it's true not many other people know as well. >> professor, can you remind our viewers whether there has been another industry, cycle, that has seen the hype and almost immediate busting of the bubble. we have the dot-com bubble. that unraveled over the course of years. this seems to be a much smaller timeframe here. >> yeah. i mean, look, the railroads were like that in the 1870s. whenever there's a new technology, what you have is a lot of new business models, some of them work, some of them don't. the difference here is given the internet, it's really easy to get information fast. so the time cycles turn out to be shorter.

it's not a new phenomenon, new technology, new business models. some of them are trying to work, some of them are not. i don't see much business here, really. i don't think there's a bubble so much as there is we just don't know which of these business loans are proven or not yet. >> there is also, though, clearly a problem with communication. mark zuckerberg doesn't particularly want to communicate to the market, doesn't want profit maximized. he's clear about that. he'll leave that to the cfo. today's "usa today" asks the question whether it's time, for example, at facebook for zuckerberg to step to one side. of course, when you look at google, eric schmidt did a lot for that business coming in in the place of founders. there's an issue of personality here. i wonder what your prescription more broadly would be. >> i did see that, simon. i think it's an interesting question. the founders, i think, are really good at focusing on the

underlying purpose of a business like facebook. it's focusing on the underlying purpose that leads to profits. but when you go public, you have to put those things together. have you to be able to communicate that -- >> we're losing your satellite but we got the basis of what you're saying. thank you very much for joining us. professor of university of virginia's business school. >> coming up next, the youngest person ever to receive funding at the age of 19. wow, just got another $11 million, in fact, at the age of 18. we'll talk to him after this. thanks to our explorer card. then, the united club. my mother was so wrong about you. next, we get priority boarding on our flight i booked with miles. all because of the card. and me. okay, what's the plan?

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welcome back to "squawk on the street." i'm courtney reagan. look at coventry health and aetna. disclosed a position of 6,660,000 shares. now aetna buying the company, he's made $60 million for investors of his fund green light capital in this position. not a bad return. that's up 30%. melissa, back to you. >> staggering. courtney, thanks for that. startup kiip could change the world, virtual games and apps, what gives it an advantage, do

things consumers usually avoid, click on ads. brian wong, a 21-year-old co-founder of kiip and he joins us. brian, geth great to speak to you. when did you start this company? >> i started it back in 2010. >> how old were you back then? you were just 19. >> i was 19 at the time, yes. >> so i imagine that you, like other 19 years old, other teenagers, you're on your mobile phone all the time. how did you come up with the idea. >> i was actually traveling. i got laid off from my previous job, which was unfortunate. i looked back and realized it was the best decision i ever made. i basically was on this long hall flight and went up and down the aisle. i noticed every person was on their phones or tablets playing a game, engorged in it. i thought that must be a huge opportunity for advertisers in mobile. quickly realized banner advertising an abysmal form

currently utilized by advertisers at the time. let's do something new, when they are happy. rather than interrupt them with banner ad let's augment happiness and make it better with a reward. >> brian, where do you take the business now? >> our big next step is extremely exciting. we had a little epiphany and realized, these achievement moments, happy moments don't just exist in games. they exist everything. an app if you track a run, ran a few miles. yeah, what if we bring it in then. we tested it with pepsi. let's reward people with a bottle of propel as they hit an achievement by running. that took on a huge amount of praise from the advertising community simply because we're expanding it beyond gains to rewards for every day life. >> it is great to speak to you.

best of luck. >> thank you so much. >> you got me when he said he was laid off at 19. this is amazing. >> it's tough. final thoughts next. born with. hing you're and inspires the things you choose to do. you do what you do... because it matters. at hp we don't just believe in the power of technology. we believe in the power of people when technology works for you. to dream. to create. to work. if you're going to do something. make it matter.

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